Grin and Bare It, Part II: Tax Issues for the Usufruct Owner in the United States

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June 19, 2023

Grin and Bare It, Part II: Tax Issues for the Usufruct Owner in the United States

Tax Notes

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As discussed in Part I of this three-part article series, the treatment of divided interests in property in the form of usufruct and bare ownership interests is an unsettled area in U.S. tax law. In this installment, we first discuss the consequences to a usufruct holder who is a U.S. person for U.S. federal income tax purposes. We then discuss the transfer tax consequences, including whether the division of the property is treated as a completed gift for U.S. gift tax purposes, which is not always clear. Finally, we discuss the exit tax consequences to a U.S. usufruct holder, a hybrid of income and transfer tax issues.

To continue reading Jenny Longman's article in Tax Notes, please click here.

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Last week, the Ninth Circuit issued a published decision striking down California’s Assembly Bill 290 (“AB 290”) on First Amendment grounds. See Fresenius Med. Care Orange Cnty., LLC v. Bonta, No. 24-3654 (9th Cir. Apr. 7, 2026). Its central holding was that providers of medical services have a protected First Amendment right to make donations to patient assistance charities that engage in expressive activity, even if those donations are driven by commercial self-interest. Although the case did not directly involve the federal Anti-Kickback Statute (“AKS”)—or any federal statute—it arguably calls into question the constitutionality of AKS proceedings often brought against pharmaceutical manufacturers that make analogous donations to patient assistance charities out of alleged self-interest. AB 290, the California statute at issue...

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On April 17, 2026, Patterson Belknap secured a significant victory for our clients, Johnson & Johnson and Janssen Biotech, Inc. (“J&J”), when the U.S. District Court for the Southern District of New York denied a preliminary injunction in a Lanham Act suit filed by Bayer HealthCare LLC (“Bayer”). The dispute concerned a retrospective scientific study sponsored by J&J that compared the real-world efficacy of both companies’ prostate cancer medications, concluding that J&J’s ERLEADA was associated with a reduction in overall risk of death approximately 50% greater than Bayer’s NUBEQA. Bayer alleged that the study was methodologically flawed, and that J&J’s publication of the study results therefore constituted “false advertising.” The statements at issue included a presentation given by the study authors at a medical...

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